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In the state of Virginia must beneficiaries who inherit qualified and unqualified annuities pay an inheritance tax on them?

Fairfax, VA |

recently read somewhere that the state of Virginia determined them to be taxable.

Attorney Answers 3


  1. Best answer

    I suspect that you are referring to income tax and not inheritance tax. There is no longer an inheritance tax in Virginia. It was replaced with an estate tax several years ago. If the estate is worth less than $2 million, then there should not be any estate tax on this asset. There very well could be an income tax, however, if any of the annuities were tax deferred.

    James Frederick

    *** LEGAL DISCLAIMER I am licensed to practice law in the State of Michigan and have offices in Wayne and Ingham Counties. My practice is focused in the areas of estate planning and probate administration. I am ethically required to state that the above answer does not create an attorney/client relationship. These responses should be considered general legal education and are intended to provide general information about the question asked. Frequently, the question does not include important facts that, if known, could significantly change the answer. Information provided on this site should not be used as a substitute for competent legal advice from a licensed attorney that practices in your state. The law changes frequently and varies from state to state. If I refer to your state's laws, you should not rely on what I say; I just did a quick Internet search and found something that looked relevant that I hoped you would find helpful. You should verify and confirm any information provided with an attorney licensed in your state.


  2. you should consult the lawyer handling the estate to answer your question. typically inheritance tax is paid for by the estate prior to the annuity being transferred to the beneficiaries. if there are any estate taxes it should be the estates responsibility. there is however the possibility that you might owe income tax on the annuity. if the estate lawyer is unable to assist you then you should consult a tax specialist to assist you

    without a detailed review by a lawyer can all the issues raised in your question be appropriately addressed...nothing in this response should be construed as establishing a lawyer client relationship..the answers herein are for informational purposes and not to be construed as advice


  3. The answer to your question is it depends when the person died.

    Currently in Virginia there is no inheritance tax. There is also no estate tax. On January 1, 2005, the “pick up tax” which was how it referred to here in Virginia, was officially phased out under the provisions of the Economic Growth and Tax Relief Reconciliation Act ("EGTRRA"). For a brief period January 1, 2005, and June 30, 2007 there was a short-lived state estate tax. However, that was phased out for deaths occurring on or after July 1, 2007. The short answer is in 2012 Virginia will not collect an estate tax for an inherited asset as long as the person died after July 1, 2007.

    In addition to worrying about taxes with the Commonwealth of Virginia you also need to be mindful of the federal estate tax. Assuming date of death in 2012, there is a very large exemption before any tax is due. The 2012 federal exemption is $5,120,000.00. That means that the time of death, the decedent’s assets (everything he or she owned at time of death) needed to exceed $5,120,000.00 before federal taxes are due. However, the federal exemption amount changes every year and has done so for the past 10 years.

    Do not be confused with inheritance tax or estate tax and income tax. A qualified annuity is subject to income tax, both state and federal, for the amount paid out of the annuity to the beneficiary each year.

    The response offered by Rhonda Miller, on behalf of Matsen, Miller, Cossa, & Gray, PLLC is intended for informational purposes only. It is not intended as professional advice and should not be construed as such.

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